See demand for cryptocurrencies from HNIs, family offices: Ajay Srivastava

Ajay Srivastava, CEO of Dimensions Corporate Finance Services, on Tuesday, said that he sees demand for cryptocurrencies from HNIs (high net-worth individuals) and family offices. Srivastava believes US equities, REITs and cryptos are taking a bite out of the PMS pie, which is why there's weak demand for the secondary market at present.

On crypto market growing as an asset class, Srivastava said, “So it is certainly growing and we are seeing a greater demand from the older HNIs and the family offices, who have got left out, to say that we need to allocate some portion to it now. "

He further added, "However, it may take some time and may not happen immediately,  but over time, I have seen universally across the last 30 days and 60 days, all big HNIs and all big family offices are saying that they need to start allocating to cryptos eventually and therefore the allocation to secondary (market) is definitely going to take a hit in terms of cryptos."

"So there is no doubt in my mind that there is a preponderance of investors who have not been in cryptos in India. In fact, most portfolios don't have cryptos, if you look at the PMS portfolios, HNIs, family offices, nobody has it actually, it is more a retail phenomenon by and large; and therefore it is affecting the secondary market and people are saying listen, let us do something different compared to equities," Srivastava mentioned, in an interview to CNBC-TV18.

"So, on one side, the first wave or the US equity buying took place, it took away a little bit of liquidity from India, now cryptos is kind of eating up so there is no alternative," he explained.

So you have got US equities, REITs and crypto all three taking a bite of the PMS pie today and therefore the demand for the secondary market is a little bit weak, Srivastava shared.

In the week ended November 19, institutional investors poured in $154 million in the crypto sector with a year-to-date total of $9.2 billion, already exceeding total inflows of $6.7 billion in 2020. Bitcoin got the lion's share of inflows with $114.4 million, equivalent to 74 percent of the total. So far this year, total inflows into bitcoin products and funds hit $6.7 billion.

The Indian government is expected to move the cryptocurrency bill at the start of the winter session of the Parliament. While the earlier draft had proposed a ban on cryptocurrency, the Finance Ministry officials are trying to “fast track” the modified bill.

Finance Minister Nirmala Sitharaman had also said a blanket ban on cryptos is off-table and said the government will take a cautious approach. She also said that the central bank coming up with a "legitimate" cryptocurrency is also a possibility.

"The committee understands this is an important and urgent topic and therefore is calling in industry stakeholders to understand what they see as opportunities and challenges for cryptofinance going forward. All key players from the industry will be there," Chairman of the Parliamentary Standing Committee on Finance, Jayant Sinha had told CNBC-TV18 last week.

For full interview, watch accompanying video.